[Congressional Record Volume 151, Number 54 (Thursday, April 28, 2005)]
[Senate]
[Pages S4590-S4595]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LIEBERMAN (for himself, Mr. Hatch, and Mr. Brownback):
  S. 975. A bill to provide incentives to increase research by private 
sector entities to develop medical countermeasures to prevent, detect, 
identify, contain, and treat illnesses, including those associated with 
biological, chemical, nuclear, or radiological weapons attack or an 
infectious disease outbreak, and for other purposes; read the first 
time.
  Mr. LIEBERMAN. Mr. President, Senator Hatch, Senator Brownback and I 
are pleased to introduce today the Project BioShield II Act of 2005.
  This is the fourth bill I have introduced on this subject, and the 
third with Senator Hatch as my lead cosponsor. We are delighted today 
to be joined by Senator Brownback, a leading advocate for research to 
cure deadly tropical diseases.
  None of us on the Hill--especially those of us with offices in the 
Hart Building--will forget October 15, the date of the anthrax attack 
on Senator Daschle's office. This date is the bioterrorism equivalent 
of September 11. We also need to remember October 5, the third 
anniversary of the 2001 anthrax death of Bob Stevens, a photo editor at 
American Media in Boca Raton, Florida, and November 17, the third 
anniversary of the discovery of a similar anthrax laced letter mailed 
to Senator Leahy. Similar anthrax attacks during these weeks were 
directed at NBC, ABC, CBS and other news organizations. All told five 
people died and thousands who might have been exposed were put on 
Cipro, including many of us and many of our staff.
  This attack on civilians with weapons grade anthrax was unprovoked. 
And unlike the case with the 9/11 attacks, we still don't know who 
mailed the anthrax letters. As with the 9/11 attacks, we were totally 
unprepared for the anthrax-laced letters. We are responding forcefully 
to the 9/11 attacks--the commission that Senator McCain and I proposed 
has issued a superb report and the Government Affairs Committee, where 
I serve as the Ranking Democrat, is hard at work translating its 
recommendations into legislation. Unfortunately our response to the 10/
15 anthrax attack has not been as forceful.
  Unlike our response to 9/11, we have not seemed to consider the 10/15 
attack to be the equivalent of a declaration of war. While we have 
taken a few constructive steps to strengthen our Bioterror defenses, we 
remain painfully vulnerable to another Bioterror attack, or a chemical 
or radiological attack.
  Many of us believe that enactment of BioShield I, last July, is a 
step in the right direction, but we don't believe that BioShield is 
sufficient. If we listen carefully, we will hear that the biopharma 
industry--which is hiding on this issue--is saying that BioShield is 
not enough. So we already have strong warning signs that more needs to 
be done.
  There is no terror threat greater than that of Bioterror. With an 
attack with a plane, a chemical attack or a radiological dispersion 
device, dirty bomb, the loss of life can be catastrophic, but the 
perimeter of the attack is fixed. With an infectious disease, the 
perimeter of an attack might grow exponentially as the infection 
spreads. It is possible to kill thousands with a bomb, chemical or 
radiation, but it is possible to kill millions with a bioterror 
pathogen.
  In the 2001 anthrax attack, the terrorist wrote a note in the letter 
to Senator Daschle that said, ``09-11-01. You can not stop us. We have 
this anthrax. You die now. Are you afraid? Death to America. Death to 
Israel. Allah is great.'' If this note had not been included in the 
letter, and if the intern who opened the letter hadn't been suspicious, 
it is possible that some Senators and many Capitol Hill staff from our 
offices--perhaps hundreds--might have died. We would only have 
discovered the attack in hospital emergency rooms, where Cipro might 
have proven to be ineffective. Cipro works as a prophylaxis only when 
it catches anthrax early, before the toxins are released into the 
bloodstream, which can happen within 24 hours of an infection. Our 
current anthrax vaccine is administered in six shots over 18 montns.
  The 9/11 Commission report states that al-Qaida ``was making advances 
in its ability to produce anthrax prior to Sept. 11'' and cited former 
CIA Director George Tenet as warning that an anthrax attack is ``one of 
the most immediate threats the U.S. is likely to face.'' Russia 
developed dozens of strains of anthrax and the security at these former 
bioweapons laboratories is suspect. It is estimated that a mason jar of 
anthrax spores sprayed over an urban area could infect 400,000 
residents, and if undetected until they started showing up in emergency 
rooms, kill half of them. It is also estimated that one hundred anthrax 
laced letters could cross contaminate thirty million letters and infect 
10,000 people with anthrax. Imagine what would happen if our mail 
system--which processed over 200 billion pieces of mail last year--were 
closed for a few months. What we need, and don't yet have, is a 
therapeutic that disarms the anthrax toxins at a late stage of the 
disease--which is the aim of a pending RFP at the Department of Health 
and Human Services.
  We saw the potential for morbidity and mortality, and massive 
economic disruption, with SARS. When SARS was rampant, Beijing, Hong 
Kong and Shanghai closed down. Quarantines were imposed and China 
authorized the death penalty on anyone who willfully spread the 
disease. During the epidemic, there were reports that the SARS virus 
was mutating to become more virulent. In China's countryside, fear of 
SARS has led to some villages setting up roadblocks to keep away people 
from Beijing and at least four riots against quarantine centers have 
been reported in recent days. Thousands were quarantined in China. In 
the end SARS spread to thirty countries on five continents, sickening 
nearly 9,000 and killing 850. SARS is a zoonotic disease that 
apparently can jump back and forth between animals and man, which makes 
it much more difficult to eradicate it. We may not have seen the last 
of it.
  We can also remember the devastating impact of the 1918 Spanish flu 
pandemic that killed more than died in the first World War, about 30-40 
million people equivalent to 100 million today. In the month of 
October, 1918, 200,000 Americans died of the disease, 43,000 soldiers 
died, and 28 percent of our population was infected. The flu's 
lethality rate was only 2.5 percent the lethality rate of the most 
common form of smallpox, variola major, is 30 percent and for 
hemorrhagic smallpox it approaches 100 percent. The lethality rate 
for SARS was about 15 percent. If the 1918 flu pandemic killed the 
equivalent of 100 million people, think of how many smallpox or SARS--
both of which could be weaponized by terrorists--could kill.

  Public health authorities are concerned about the incidence of avian 
influenza in humans. There is now concrete evidence that this virus can 
be transmitted human-to-human. When humans contract the pathogen from 
birds, the death rates are very high; a majority die. Since January 
2004, a total of 23 confirmed human cases of avian influenza virus 
infections have been reported in Vietnam with 19 deaths and 12 cases in 
Thailand with 9 deaths. These cases were associated with widespread 
H5Nl poultry outbreaks that occurred at commercial and small backyard 
poultry farms. Since December 2003, nine countries have reported H5Nl 
outbreaks among poultry. More than 100 million chickens have been 
culled in an effort to stop the outbreak. The virus now appears to be 
able to infect mammalian hosts, including pigs and cats, an unusual 
prowess for an avian virus. This raises concern as pigs are also hosts 
of human flu viruses and this could yield

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a hybrid avian flu strain that can be passed human-to-human. The avian 
flu virus apparently is now carried by migratory birds so it may be 
very difficult to eradicate the virus. We have no vaccine for the 
disease and the one therapeutic Tamiflu--is only effective if given 
very early after the onset of symptoms. It is feared that the virus 
might evolve resistance to Tamiflu. Public health officials believe 
that in theory the avian flu could cause a ``pandemic killing millions 
of people worldwide, and possibly hundreds of millions.'' Whether H5N1 
could be used as a Bioterror weapon against agriculture or humans is 
not known.
  In 1947 there was an outbreak of smallpox in New York City. 
Eventually two of the twelve who were infected died. But the smallpox 
vaccination campaign was massive 500,000 New Yorkers received smallpox 
vaccinations the first day and eventually 6.35 million were vaccinated 
in less than a month, 85 percent of the city's population. President 
Truman was vaccinated prior to a trip to New York City.
  If we suffered another smallpox outbreak, it is not likely that a 
vaccination campaign would go so smoothly. It is now estimated that if 
the current smallpox vaccine were deployed in the United States 350 to 
500 individuals might die from complications. The current vaccine is 
not recommended for patients who have eczema or are immunosuppressed, 
HIV-positive or are pregnant. Even worse, based on a 1971 accidental 
release of smallpox from a Soviet bioweapons laboratory, some speculate 
that the Soviets successfully weaponized a rare and especially lethal 
form of smallpox, hemorrhagic smallpox, with near 100 percent 
lethality.
  Mother Nature's pathogens are dangerous--smallpox, anthrax, plague, 
tularemia, glanders, typhus, Q fever, Venezuelan equine encephalitis, 
brucellosis, botulinum toxin, dengue fever, Lassa fever, Russian 
spring-summer encephalitis, Marburg, Ebola, Bolivian hemorrhagic fever, 
Argentinean hemorrhagic fever and fifty other pathogens could kill 
thousands or even millions. But on the horizon are more exotic and 
deadly pathogens.
  We have reports that the Soviet Union developed genetically modified 
pathogens such as a hybrid plague producing diphtheria toxin. This 
manipulation increased virulence and made the plague microbe more 
resistant to vaccine. Other possibilities include a Venezuelan equine 
encephalomyelitis-plague hybrid is a combination of the virus and 
bacteria; we have no idea what symptoms such a pathogen would manifest 
or how we might diagnose or treat it. Other hybrid pathogens might be 
developed, including a Venezuelan equine encephalomyelitis-Ebola 
hybrid.
  We have reports that the Soviet Union developed a powdered Marburg, a 
hemorrhagic fever where every cell and organ of the victim bleeds. 
Symptom of Marburg include kidney failure, recurrent hepatitis, 
inflammation of the spinal cord, bone marrow, eyes, testes, and parotid 
gland, hemorrhaging into the skin, mucous membranes, internal organs, 
stomach, and intestines, swelling of the spleen, lymph nodes, kidneys, 
pancreas, and brain, convulsions, coma and amnesia.
  Genetically modified pathogens are another possibility. In 2001 the 
Journal of Virology reported that Australian scientists seeking to 
create a contraceptive for mice used recombinant DNA technology to 
introduce Interleukin 4 into mousepox and found that it created an 
especially virulent virus. In the words of the scientists, ``These data 
therefore suggest that virus-encoded IL-4 not only suppresses primary 
antiviral cell-mediated immune responses but also can inhibit the 
expression of immune memory responses.'' This public research suggests 
that introducing IL-4 can create an Andromeda stain of a virus, 
information of potential use to terrorist sociopaths. In addition, 
published studies describe how to create a recombinant vaccina virus to 
induce allergic encephalomyelitis in rabbits, and potentially--highly 
lethal smallpox virus capable of causing paralyses in humans and how to 
synthesize the polio virus in a biochemical laboratory .
  Other possible pathogens--some of which the Soviet worked on--include 
antibiotic resistant pathogens. The Soviets apparently developed a 
strain of plague resistant to ten different antibiotics, and a strain 
of anthrax resistant to seven different antibiotics. Some claim the 
Soviets developed a strain of anthrax resistant to the current U.S. 
anthrax vaccine. A part of this research in a hamster model was 
published in ``Vaccine'' so this information is available to 
terrorists.
  Other exotic pathogens might include autoimmune peptides, antibiotic 
induced toxins, and bioregulators and biomodulators. An autoimmune 
peptide might stimulate an autoimmune attack against the myelin that 
sheaths the target's nerve cells. Antibiotic induced toxins are hybrid 
bacteria-viruses where antibiotics administered to treat the bacterial 
infection stimulate the virus to release a deadly toxin; the greater 
the doses of antibiotics, the more toxins are released. Bioregulators 
and biomodulators are synthetic chemical that bond to and disrupt 
receptors that govern critical functions of the target, including 
nerve, retinal, liver, kidney, heart, or muscle cells to cause 
paralysis, blindness, schizophrenia, coma, or memory loss.
  Some of these might be available now from the 60 bioterror research 
laboratories maintained by the Soviet Union. Eventually, terrorists 
might be able to set up full-blown biotechnology laboratories. Rogue 
states could do so and they might then transfer bioweapons to 
terrorists or lose control of them. Over the long term, as the power of 
modern biotechnology grows, the bioterror threat will grow and 
increasingly virulent and exotic weapons might become threats.

  In November 2003 the CIA's Office of Transnational Issues published 
``Our Darker Bioweapons Future,'' which stated that the effect of 
bioengineered weapons ``could be worse than any disease known to man.'' 
The rapid evolution of biotechnology makes monitoring development 
ofbioweapons extremely difficult. Some ofthese weapons might enable the 
development of ``a class of new, more virulent biological agents 
engineered to attack distinct biochemical pathways and elicit specific 
effects, claimed panel members. The same science that may cure some of 
our worst diseases could be used to create the world's most frightening 
weapons.'' It specifically mentioned the possibility of ``binary BW 
agents that only become effective when two components are combined (a 
particularly insidious example would be a mild pathogen that when 
combined with its antidote becomes virulent)''; ``designer'' BW agents 
created to be antibiotic resistant or to evade an immune response; 
weaponized gene therapy vectors that effect permanent change in the 
victim's genetic makeup; or a ``stealth'' virus, which could lie 
dormant inside the victim for an extended period before being 
triggered.
  Illustrating the speed with which biotechnology is advancing to 
create new bioterrorism threats is a recent announcement by Craig 
Venter and his Institute for Biological Energy Alternatives that in 
fourteen days they had synthetically created working copies of the 
known existing bacteriophage virus Phi X174. Other researchers had 
previously synthesised the poliovirus, which is slightly bigger, 
employing enzymes usually found in cells. But this effort took years to 
achieve and produced viruses with defects in their code. So the 
timescale has shifted from years to weeks to make a virus. There are 
other bigger viruses that would require more time to assemble. Venter 
asserts that his team could make a bacteria with about 60 times larger 
genome from scratch within about a year of starting. Does this mean 
that the debate about whether to destroy smallpox virus stocks is 
pointless because any virus or bacteria whose DNA sequence is published 
is eventually going to be easily creatable by labs all around the 
world?
  These pathogens might be deployed by terrorists, sociopaths or rogue 
states that have no compunctions about killing massive numbers of 
``infidels'' or enemies in the west. They would experience great joy in 
sowing widespread panic, injury and death in America. Osama Bin Laden's 
spokesman, Sulaiman Abu Ghaith, bragged that al Qaeda has ``the right 
to kill 4 million Americans'' in response to deaths he claims the west 
has inflicted on Muslims. We are facing sociopaths with no compunction 
about using

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whatever weapons of mass destruction they can develop or secure. They 
would see the potential to unleash a weapon in North America and trust 
that our borders would be closed so that it would only rage here and 
not spread to the Muslim world.
  The Brookings Institution estimated that a bioterror attack would 
cause one million casualties and inflict $750 billion in economic 
damage. An earlier Office of Technology Assessment found that there 
might be three million casualties. If there are this many casualties, 
what can we expect in the way of public panic and flight? A 2004 poll 
finds that ``most Americans would not cooperate as officials would 
expect them to during a terrorism incident.'' Only 2/5 said that they'd 
``follow instructions to go to a public vaccination site in a smallpox 
outbreak'' and only 3/5 would ``stay in a building other than their own 
home . . .'' A vivid vision of what an attack might look like is found 
in Albert Camus' The Plague, with its incinerators and quarantine 
camps. We can review the history of the Black Death, which killed up to 
one half of Europe's population between 1348 and 1349.
  Imagine what would happen if the attack involves a pathogen for which 
we have no diagnostic, vaccine or therapeutic. If we resorted to 
quarantines, what would the rules of engagement be for the police and 
military forces we deploy to enforce it? Would it be possible to 
establish an effective quarantine if there is mass panic and flight? 
Would our hospitals be overwhelmed by the ``worried well'' ? Would 
public health workers continue to serve or also flee? If our hospitals 
are contaminated, where would Americans receive medical care for non-
terror related emergencies?
  What would happen if a bioterror, chemical or radiological attack 
closed Atlanta's Hartsfield International Airport--which handled nearly 
eighty million passengers last year? Or what would happen if we put a 
hold on the one hundred and twenty million international airline 
arrivals and departures we see each year? What would happen if we were 
forced to close our borders with Mexico and Canada--with 500 million 
crossings last year? What would happen if we restrained the 2.79 
trillion automobile passenger miles driven in the U.S., one billion of 
which exceeded 100 miles?
  What would happen if a terror attack rendered certain types of 
business activity uninsurable? What will happen if large swaths of 
residential real estate--none of which is currently insured for acts of 
terror--were contaminated and rendered worthless with anthrax spores?
  We are vulnerable to a bioterror attack in many ways, but one of the 
most troubling is that we have essentially none of the diagnostics, 
therapeutics and vaccines we need to treat those who might be exposed 
or infected. If we don't have these medicines, we are likely to see 
quarantines and panic, which will amplify the damage and disruption. My 
office is on the 7th floor of the Hart Building, immediately above 
Senator Daschle's office. We were told if we immediately started a 
course of treatment with Cipro we would not die, so there was no panic. 
Think what would have happened if the government had said, ``We don't 
know what this is, it's deadly, we have no way to tell who has been 
exposed, and we have no medicines to give you.''
  In the summer of 2000 the Defense Science Board found that we had 
only one of the fifty-seven diagnostics, drugs and vaccines we most 
need to respond to a bioterror attack, we had a therapeutic for 
chlamydia psittaci, a bacteria. It projected that we'd have twenty of 
the fifty-seven within 5 years and thirty-four within 20 years. But 
today we have only two of the fifty-seven countermeasures, we now have 
a diagnostic for anthrax.
  At this rate of developing these medical countermeasures, we won't 
have twenty of them available until 2076 and we won't have thirty-four 
until 2132. This list does not include antibiotic resistant pathogens, 
hybrid pathogens, genetically modified pathogens, and a host of other 
exotic bioterror pathogens.
  The Congress administration have not responded to the anthrax attack 
with an appropriate sense of urgency, especially with regard to the 
development of medicines. We have not responded with a crash industrial 
development program as we did when we developed radar during the Second 
World War or as we are now undoubtedly undertaking to detect roadside 
bombs. Reluctantly, I would characterize our national response as 
lackadaisical.
  December 4 is the third anniversary of my introduction of legislation 
to provide incentives for the development of medical countermeasures--
including diagnostics, therapeutics and vaccines--for bioterror 
pathogens, S. 1764. Chairman Hatch, October 17 is the second 
anniversary of our introducing our first bill together on this subject, 
S. 3l4, and we introduced our current bill on March 19 of last year (S. 
666). Twenty months ago President Bush proposed Project BioShield, a 
bill based on one of the twelve titles in our bills, and it was finally 
enacted into law on July 21. If we enact one of the titles of our bill 
every two years, it'll take 22 more years to complete our legislative 
work.
  The critical issue for this hearing is whether Project BioShield, 
Public Law 108-276, is sufficient or whether we need to supplement it 
with BioShield II, a bill that you and I intend to introduce this Fall. 
BioShield is only one title of our proposal--the title that provides 
that the government will define the size and terms of the market for a 
Bioterror countermeasure in advance before a biopharma company puts its 
own capital at risk. This is a necessary first step; companies won't 
risk their capital to develop a product unless they can assess the 
possible rate of return, product sale on their investment.
  Enacting BioShield is a step in the right direction. If we were to 
enact only one idea first, this is the right first step. We will now 
see how the Department of Health and Human Services implements this 
law. We will see what R&D priorities it sets, whether it projects a 
market for these products sufficiently large to engage the better 
biopharma companies in this research, and whether it sets contract 
terms that company Chief Financial Officers find acceptable.
  Unfortunately, we all heard a deafening silence from biopharma 
industry--the target of this legislation--as BioShield was being 
considered. The industry did essentially nothing to fix the 
Administration's draft--which the industry privately stated was laced 
with dysfunctional provisions. The industry did essentially nothing to 
pass BioShield. And the industry has said essentially nothing since 
BioShield was enacted.
  It is clear to me that BioShield is not sufficient to secure 
development of the medical countermeasures we need, indeed, I believe 
it is woefully insufficient.
  The industry is skeptical that the government will be a reliable 
partner during the development bioterror countermeasures. The basis of 
its skepticism runs deep.
  The industry points to the Cipro procurement as a case in point. In 
1999, before the anthrax attack, Bayer, the developer of Cipro, was 
asked by FDA and CDC to secure a label indication for Cipro for 
anthrax. The government wanted to have one antibiotic available that 
was explicitly labeled for anthrax--it understands that patients might 
be reluctant to take a medicine for anthrax where it is not labeled for 
this indication. Bayer incurred the expenses to do this with no 
expectation of ever utilizing the product in this manner, and when the 
attack occurred, Cipro was the only therapeutic with a label indication 
for anthrax. Bayer handled this emergency with honor. It immediately 
donated huge stocks of Cipro, 2 million tablets to the Postal Service 
and 2 million tablets to the Federal government to be used to protect 
those who might have been exposed or infected. The government then 
sought to procure additional stocks of Cipro and demanded that Bayer 
sell it as one-fourth the market price. Threats were made by Members of 
Congress that if Bayer would not agree to this price the government 
might step in to challenge the patent for Cipro. Bayer readily agreed 
to the deep discount. We can assume that every other purchaser of Cipro 
then demanded this same price and that this cut Bayer's market return 
for Cipro. To add insult to injury, Bayer has had to defend itself from 
lawsuits by those who took Cipro in response to the attack even though 
it did what was asked, provided more than enough free product to treat

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all patients and greatly reduced it's stockpile pricing. Bayer also was 
deeply concerned with employee and plant security risks when it was 
publicly identified as the sole source of this counter-bioterrorism 
agent.
  The industry view this incident as proving that with regard to 
bioterrorism research, no good deed will go unpunished. If a large 
pharmaceutical company can be manhandled this way, what would happen to 
a small biotechnology company? The industry expects that if there is an 
attack, and the company has the indispensable medicine we need to 
respond to it, the government is likely to steal the product. The 
industry is deeply skeptical of the government already. It has very 
complex and often contentious relationships with other HHS agencies, 
including the Center for Medicare Services, the Food and Drug 
Administration, and the National Institute of Health. It has constant 
battles with state Medicaid agencies. This is not an industry that 
trusts government.
  Some in Congress have proposed legislation that feed industry fears. 
In 1994 and 1995 legislation was introduced in the House, H.R. 4370, 
introduced on May 10, 1994, and H.R. 761, introduced on January 31, 
1995, that provided the government with eminent domain power with 
regard to AIDS to confiscate ``all potential curatives and all data . . 
. regarding their development,'' including the patents for such 
compounds. Similarly, in 1999 and 2001 legislation was introduced in 
the House, H.R. 2927, introduced on September 23, 1999, and H.R. 1708, 
introduced on May 3, 2001, that provided for the compulsory licensing 
of ``any subject invention related to health'' where the government 
finds it ``necessary to alleviate health or safety needs'' or the 
patented material is ``priced higher than may be reasonably expected 
based on criteria developed by the Secretary of Commerce.'' Legislation 
has been introduced that would deny the benefits of the R&D tax credit 
for research by pharmaceutical companies where the products that arise 
from that research are sold at higher prices abroad than in the United 
States. See H.R. 3665 introduced on February 15, 2000.
  The industry response to these threats to its patents must be seen in 
light of the events of March 14, 2000. On that day a White House 
spokesman apparently indicated that the government might move to 
challenge some biopharma industry patents for genes. The industry lost 
$40 billion in market capitalization in the panic that ensued on Wall 
Street. That was not only the beginning of a deep drought in biotech 
company financing, it was the beginning of the collapse of the entire 
NASDAQ market. A similar collapse and drought had occurred in 1993-1994 
the Clinton Administration proposed that the prices of ``breakthrough 
drugs would be reviewed by a special government panel.''
  The issue of price controls and patents was recently considered and 
rejected by NIH in response to a petition for the government to march-
in on the patent of Abbott Laboratories for ritonavir, sold under the 
name of Norvir, an AIDS therapeutic. The petitioner, Essential 
Inventions, asked that the government cancel the license of this patent 
to Abbott, which it alleged was charging too much for Norvir. The 
petitioner had also been involved in the 1994-1995 NIH proceeding, 
where NIH reviewed the impact of its 1989 protocol to review whether 
``reasonable'' prices were being charged by companies that had licenses 
with NIH. NIH found that this price review process was destroying the 
NIH technology transfer program--companies simply would not enter into 
agreements with NIH. As a result, NIH repealed the price review 
process. The new march-in petition raised essentially the same issues 
and if the petition had been granted, we could have expected that the 
NIH tech transfer process will be crippled--again, as it was from 1989-
1995. In rejecting the petition, NIH did not state, however, that is 
has no right to march-in based on the price of a product, implying that 
it could or might assert such power in the future. This can only have a 
chilling impact on companies considering entering into biodefense 
procurement and research agreements.
  Aside from fears about government actions, we could not have picked a 
worse time to ask the industry to undertake a whole new portfolio of 
research. The biotech NASDAQ index stood at 1380 and it now stands at 
about 725. The Amex biotech index peaked at 801 and it now stands at 
about 525. The Dow Jones pharmaceutical index peaked at 420 and it now 
stands at about 275. The biotech industry raised $32 billion in capital 
in 2000 and only $16 billion last year. In June of this year, 36 
percent of the public biotech companies had stock trading at less than 
$5 per share. There were 67 biotech IPOs in 2000 and only 7 last year. 
The industry losses each year continue run to $4 billion. The National 
Venture Capital Association reports that only 2 percent venture money 
went into biodefense following the October anthrax attack.
  Of the 506 drugs publicly disclosed to be under development by the 22 
largest pharmaceutical companies, only 32 are for infectious disease 
and half of these are aimed at HIV/AIDS. In 1967 we had 67 vaccine 
companies and in 2002 we had 12. World wide sales vaccines is about $6 
billion, but the world wide sales of Lipitor are $10 billion.
  In addition, it is not clear whether the government is able or 
willing to provide the industry with the operating margins--profits--it 
sees for its other products. The operating margin for successful 
biopharma companies is 2.76 to 3.74 times as great as the operating 
margins for major defense contractors. This means that the defense 
contractor model will not work to engage biopharma companies in 
developing medical countermeasures for bioterror agents. Whether the 
successful bipharma companies are ``too profitable'' is a separate 
issue. The issue addressed here is the operating margin that successful 
biopharma companies seek and expect as they assess lines of research to 
undertake. If the operating margin for biodefense research is less, or 
substantially less than the operating margin for non-biodefense 
research, it is not likely that these companies will choose to 
undertake biodefense research. This research is a voluntary undertaking 
putting their capital at risk; there is no requirement that they do 
this when the prospects for profits are not competitive with that from 
other lines of research.
  Mostly we are seeing the industry hiding, not commenting on the 
pending legislation, not participating in the legislative process, and 
making every effort not to seem to be unpatriotic or greedy. Companies 
do not say in public that they are disinterested. They will not say 
what package of incentives would be sufficient to persuade them to take 
up biodefense work. They fear a debate on patents. They feel besieged 
by the current drug import debate, pressure from CMS over drug prices, 
and the debate over generic biologics. While I understand these fears, 
we simply have to know what it would take in the way of incentives to 
establish a biodefense industry. If the incentives in BioShield or 
BioShield II are not sufficient, we need to know what incentives are 
sufficient. We need to know what reassurances would persuade the 
industry that what happened to Bayer will never happen again. And only 
the industry can give us a clear answer to these questions. We cannot 
have a dialogue on these urgent national questions without the 
government listening and the industry speaking.
  The goal of BioShield II is to shift the risk of countermeasure 
research and development to the industry. Given the skepticism of the 
industry about the reliability of the government as a partner, shifting 
the risk to the industry--with it risking its own capital to fund the 
R&D--will be difficult. But engaging the industry as entrepreneurs, 
rather than as defense contractors, is likely to be less expensive for 
the government and it's much more likely to secure the development of 
the medicines that we need.

  If the Government funds the research, the industry can expect to 
receive the operating margins that are typically paid to defense 
contractors--8.5-9 percent. If the industry risks its own capital and 
funds the failures and cost overruns, the industry believes it would be 
justified demanding the operating margins that are typically paid in 
the commercial sector--28-32 percent.
  If the Government funds the research, the industry expects that the 
government will control or own the patents associated with the 
medicines. If the industry funds the research, it

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believes it has claims on all the patents.
  The only companies that are likely to accept a defense contractor 
model are companies with no approved products, no revenue from product 
sales, and no other source of capital to keep the lights on. For them 
Government funding is ``non-dilution'' capital, meaning it's a form of 
capital that does not dilute the ownership shares of its current 
shareholders. Many biotech companies have stock trading in the low 
single digits, so they cannot issue another round of stock that would 
enrage the current shareholders. For them this Government funding might 
validate the scientific platform of the company, generate some revenue, 
and hype the stock.
  Biotech industry executives state in private that if their capital 
markets strengthen they will be even less likely to consider bioterror 
countermeasure research. One CEO whose company has received an NIH 
grant for bioterror countermeasure research stated in private that his 
company would never have considered this entanglement with the 
Government if it had any other options to fund its research.
  Our goal with BioShield IT should be to engage the successful 
biopharma companies in this research--companies that have brought 
products to the market--and persuade them that the Government will be a 
reliable partner. Then the risk of failure and cost overruns is shifted 
to the industry and we've engaged the companies with a track record of 
bringing products to the market. The Government will need to provide 
substantial rewards if--and only if--the companies do succeed in 
developing the medicines we need, but then the Government is only 
paying for results. When the Government funds the research, it funds a 
process with no guarantees of any success. Providing the industry with 
substantial rewards for success is a model that engages the industry as 
entrepreneurs, drawing on the greatest strength our Nation has in the 
war on terror.
  Our bill addresses a critical question: who is in charge for 
Government if there's a mass casualty event and how do they lead the 
multifaceted response. The legislation sets up an interagency board to 
map out and develop the response to such an event and places a new 
Assistant Secretary Chief Medical Officer at the Department of Homeland 
Security as its chair. In addition, the new Assistant Secretary would 
lead the DHS assets and resources as part of this effort. While this 
proposal is the result of discussions with some of the experts in this 
area, we recognize there may be different points of view about the 
optimal structure for the medical response capabilities within DHS and 
the proposed structure in this bill is open to further discussion. I 
look forward to working with the chairman of the Senate Homeland 
Security and Government Affairs Committee, Senator Collins, and others 
in exploring these complex issues. On these issues, this bill is a 
discussion draft.
  We should not need a 9/11 Commission report to galvanize the 
administration and the Congress to respond to the unprovoked and deadly 
bioterror attacks of 3 years ago. The threat could not be more obvious 
and what we need to do is also obvious. If we don't develop the 
diagnostics, therapeutics, and vaccines to protect those who might be 
exposed or infected, we risk public panic and quarantines. We have the 
world's preeminent biopharma industry and we need to put it to work in 
the national defense.
  BioShield I is a step in the right direction, but it is a small step 
that does not take us where we need to go. We need to follow the 
implementation of BioShield very carefully and set clear metrics for 
determining its effectiveness. We should not wait to begin to review 
the policy options available to supplement BioShield. Senator Hatch and 
I will be proposing BioShield II and we will press for its 
consideration. We should press the biopharma industry to present its 
views on what it will take to engage it in this research and what it 
will take to establish a biodefense, research tool, and an infectious 
disease industry.
  The American philosopher, George Santana said, ``Those who cannot 
remember the past are condemned to repeat it.'' It's only been 3 years 
since the anthrax attack but I fear our memory of it already has faded. 
Let this hearing stand as a clear statement that some of us in the 
Congress remember what happened and are determined not to permit it to 
happen again. War has been declared on us and we need to act as if we 
noticed.
  Mr. HATCH. Mr. President, more than 3 years ago, our country suffered 
the most deadly attack ever on our soil. We woke up on the morning of 
September 11, 2001 to a new reality.
  A month later, we again realized the magnitude of the ever-changing 
threat we were facing when the Senate Hart Office Building was 
contaminated with anthrax and was closed for three months.
  Most Americans were shaken out of their sense of complacency in 2001.
  As many will recall, after 9/11, Congress took action to secure our 
borders, our ports, and our airlines and bolster our public health 
infrastructure.
  Yet, it is important to note that the key steps necessary to protect 
our country against the continuing threat of bioterrorism are still 
being carefully reviewed and revised.
  And while these steps are being evaluated, time is running out. Even 
yesterday, we heard news reports that al-Qaida is planning attacks on 
our country through chemical plants within the next five years.
  While Congress took an important step when the Project BioShield Act 
of 2004 was signed into law last July, I believe that much more still 
needs to be done.
  That is why I am once again joining my good friend and colleague, 
Senator Joe Lieberman, in introducing this bipartisan bill. I am proud 
to have been Senator Lieberman's primary partner on this legislation 
over the past several years.
  Indeed, we are pleased that some key concepts contained in our 
earlier bills, such as the guaranteed market, have been adopted by the 
administration and our colleagues in Congress.
  In the last congress, the Senate Judiciary Committee held a joint 
hearing with the Senate Health, Education, Labor and Pension Committee 
to determine what priorities should be included in the follow-on 
legislation, the Bioshield II bill, and to raise awareness on what else 
needs to be done in order to combat bioterrorism. It is clear that we 
do need to continue our efforts, and that is why I will continue to 
push for action on this legislation until the bill is signed into law 
by the President.
  It is well known that terrorists are specifically interested in using 
biological weapons, such as those produced in the Soviet Union before 
its collapse.
  Some experts believe that Soviet scientists were able to develop 
smallpox strains that were universally lethal.
  Some believe they developed a strain of Black Plague that is 
resistant to 10 different antibiotics.
  Today, it is unclear where some of these former Soviet scientists are 
working and, even more disturbing, it is not clear if these bioterror 
agents are still in the former Soviet Union.
  As new varieties of biological weapons are developed, the threat of 
another attack becomes a very real possibility. Again, that is why 
Senator Lieberman and I strongly believe that Congress needs to act on 
the Liberman-Hatch legislation immediately.
  Over 4 years ago, Congress instructed the executive branch to perform 
a bioterrorism exercise to determine our Nation's state of preparedness 
against a bioterror threat.
  In May 2000, a bioterrorism exercise was initiated and the naturally 
occurring plague bacterium, Yersinia Pestis, was theoretically 
unleashed in Denver. In that exercise, one antibiotic that is available 
to the public was used to combat the bioterrorism plot and treat the 
infected individuals.
  I believe that this exercise needs to be conducted again--a more 
realistic scenario would be one in which no effective treatment is 
available.
  To me, that is the more realistic and threatening scenario.
  There are already numerous diseases where no actual cure exists, 
where all the clinicians can do is to support the patient and hope that 
they survive. We need to focus our efforts on improving our ability to 
care for these illnesses, as they are currently very attractive weapons 
to our enemies.
  Even as we continue to invest resources to build up a prepared public 
health infrastructure, we must also develop medicines to threat those 
who

[[Page S4595]]

are exposed or infected. Otherwise, we will be forced to impose 
quarantines, just as our ancestors did in times of pestilence, and we 
will surely find it as difficult a proposition as they did. 
Quarantining hundreds, maybe even hundreds of thousands of people 
would, obviously, be extremely difficult to manage.
  Developing ways to prevent, detect, and treat dangerous pathogens 
must be a priority for our Nation so that we do not face these dreadful 
scenarios.
  Our best defense against bioterrorism is a full medicine chest. We 
must develop medicines to treat the naturally occurring biologic 
agents, and, in addition, we need to develop medicines to treat 
bacteria and viruses that have been genetically manipulated as weapons 
to cause death or injury to human beings.
  Therefore, the biopharma companies must be engaged in these 
discussions because they will play an integral role.
  Our bill, BioShield II, is the next step in the legislative process 
to ensure bioterror readiness.
  We cannot afford to wait. Every day that we sit idle, we encourage 
our enemies to move forward.
  We must abandon business-as-usual and take vigorous steps to protect 
our Nation, our communities, our citizens and our industries from 
future bioterrorist attack, especially given the implication of further 
attacks on the United States.
  BioShield II encourages Congress to take vital steps to protect our 
Nation through an array of intellectual property, tax, procurement, 
research, liability, and other incentives to ensure the creation of a 
robust biodefense industry.
  Direct government funding can only go so far.
  To be effective, we must also enact incentives so that potential 
investors will want to fund the research associated with building a 
strong and flexible defense against potential attacks.
  But to accomplish this goal, we must unleash the creative genius of 
the biopharma industry to work with us on these solutions.
  Bioshield II will encourage biopharma companies to take the lead in 
the development of vaccines, therapeutics and diagnostics to combat 
bioterrorism. These efforts will also help protect our Nation against 
naturally occurring diseases. In fact, a major improvement in this bill 
is that we allow the array of incentives to be employed against 
infectious diseases and as well as disease prevalent in the developing 
world.
  All research on infectious disease is interrelated. SARS, HIV, 
malaria, and avian and pandemic flue are chilling reminders that our 
public health system must be able to take on all comers; it is not just 
deliberately engineered agents that threaten us.
  Our infrastructure--our researchers, our pharmaceutical industry, our 
hospitals, and our caregivers--must be prepared and equipped to fight 
illness, wherever and however it occurs. By expanding the scope of 
covered research under this bill, we may also discover cures for 
diseases that afflict the world's poorest nations.
  The goal of our legislation is to have a safer and better prepared 
America. But, to do this we must provide researchers and investors with 
the proper incentives. Forming unprecedented and vigorous partnerships 
with these companies is the key. Otherwise, this endeavor will never 
work and the American public will remain at great risk.
  The harsh reality is that nearly 4 years after 9/11, we have not 
developed one significant bioterrorism countermeasure.
  Aside from vaccines for smallpox and anthrax--both of which have 
their own downsides--and a handful of antibiotics and anti-infectives--
also with their own array of strengths and weaknesses--the cupboard is 
bare.
  This is simply not acceptable.
  As new varieties of bioterror weapons are developed, the threat of 
another attack comes ever-closer to our shores. For this reason, 
Senator Lieberman and I are introducing the ``Project BioShield II Act 
of 2005''.
  We plan to work closely with all interested members of Congress, 
including Senator Burr, Senators Enzi and Kennedy, chairman and ranking 
Democratic member of the HELP Committee respectively, Senators Grassley 
and Baucus, chairman and ranking Democratic member of the Finance 
Committee, Senators Specter and Leahy, chairman and ranking Democratic 
member of the Judiciary Committee; and Senator Collins, chairman of the 
Senate Homeland Security and Governmental Affairs Committee.
  We will work closely with all the relevant officials in the Bush 
administration; and we will work with Senate Leadership and with all 
interested parties in the House.
  I urge my colleagues to join me in supporting this very important 
legislation.

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